Investment Philosophy

Walrus Partners identifies high potential "Special Situation" stocks that are capable of generating superior investment returns. The companies we invest in typically are leaders in fast growing industries. Finances are solid. Management is proven. Return on capital (excluding cash reserves) is higher than normal. Profit margins are lofty, allowing the companies to maintain growth at a fast clip without external financing. Unusually high P/E multiples are avoided to contain risk. Our portfolio usually consists of approximately 25 positions. Portfolio cash normally is 5%-10% of total assets. That figure may rise or fall as the fund reallocates its capital into new positions. Leverage rarely is used, also  to reduce risk. We engage in short selling to reduce volatility, particularly when market valuations are high and credit conditions tighten. We don’t guarantee any short commitment. Most of our short investments are sector specific ETFs (Exchange Traded Funds) although we do occasionally short individual stocks. Our research is focused primarily on the buy side -- discovering emerging growth stocks that offer substantial appreciation potential.

Walrus Partners invests in stocks to produce returns that are significantly independent of the general market averages. The statistical correlation between our portfolio’s performance and the popular market benchmarks has been relatively low since inception. (See “Performance - Statistics” for a detailed analysis.) We focus on under-followed companies in the “Post Venture – Pre Institutional” segment that are capable of providing exceptional appreciation at a normal risk level. Risk is reduced by the individual companies’ rising base of earnings. Gains are magnified by expanding P/E multiples, which often result from their eventual discovery by institutional buyers.

Most of the companies Walrus Partners invests in have initial market capitalizations of less than $1.0 billion. Many are smaller than $100 million. Small stock price performance tends to be earnings driven. We research potential investments thoroughly to minimize risk and steer capital to the most promising candidates. Performance tends to hold up as long as the underlying earnings growth is sustained. Small companies also can be more transparent, facilitating ongoing analysis. Under today’s S.E.C. rules we never obtain information that isn’t available to the investment community at large. But small companies usually are covered by fewer security analysts, fund managers, and brokers. Sometimes there is less competition for information as a result.

Walrus Partners maintains a diversified portfolio. Initial positions usually represent 2%-4% of the fund’s assets. Our risk management strategy assumes that 1-in-10 selections will fail catastrophically. It also assumes that one industry concentration will perform below expectation. So we diversify our portfolio among several broad industry groups. We diversify further by concentrating on the leading companies within a variety of sub-groups. Positions are sold when it becomes apparent that financial results are unlikely to achieve our growth objectives.

Please visit our research website “GrowthStockInsider.com” to see some of the of companies Walrus Partners currently invests in. Those reports contain detailed financial data and estimates. The material also presents our methodology, thought process, and the accounting adjustments we make to establish a clear picture of the companies’ genuine earnings power.